Pruksa Real Estate

Pruksa Real Estate Plc (PS)

- 2013 achieved all targets. Presales were Bt41.3bn, +40% YoY, thanks to the high 130%
growth in condo presales to Bt15.5bn, with growth of 15% to Bt17.2bn for TH and 9%
to Bt8.4bn for SDH. The portion of condo presales rose to 38% in 2013 from 23% in
2012. Revenue was ~Bt37bn, +37% YoY, again due to condos (+184% to Bt8.1bn) from
the six projects completed last year, plus TH (+32% to Bt19.7bn); SDH was flat.
- Pre-sales target Bt41-45bn, growth up to 9%. PS held a conference call to present
its business plan for 2014, which it says already incorporates poor market sentiment in
1Q14. It plans to expand presales by up to 9% to Bt41-45bn, with TH growing a strong
28-41% to Bt22.1-24.3bn, SDH by 37-50% to Bt11.5-12.6bn, while condo will drop 50-
55% to Bt7-7.7bn. Though presales will grow, new launches will shrink to 40-50 projects
worth Bt40-50bn in 2014 from 60 projects worth Bt50.2bn in 2013, as it plans for more
presales from stock.
- Revenue target Bt40-42bn, growth of 8-14%. This implies growth of 8-13% to
Bt21.2-22.3bn for TH, 27-35% to Bt11.2-11.8bn for SDH, but a decline of 6-11% to Bt7.2-
7.6bn for condo. Note that ~Bt10.5bn of condo backlog is due for transfer this year, but
PS expects only ~70% of that will actually be transferred. To support growth, PS will
invest ~Bt2bn in pre-cast plants, adding 75% to capacity, to 1,120 units/month by 4Q14.
- We are more conservative. We see presales and revenue targets for TH and SDH as
optimistic given the current high household debt and debt service ratio, continued
tight reins on bank loans and a weaker economy plus political turmoil. PS plans to
increase TH presales/revenue in the >Bt3mn/unit segment, which is small and
competes with similarly-priced SDH, and in the >Bt5mn/unit SDH segment; this will not
be easy. We are thus more conservative and forecast a fall in presales of 16% YoY to
Bt35bn (15-22% below its goal), on halved condo presales and 5% low-rise growth.
- Earnings revision. We use more conservative assumptions and this reduces 2014 by
6% to Bt5.4bn and 2015 by 8% to Bt6.1bn. As of end-2013, total backlog was Bt37.8bn:
73% condo, 20% TH and 7% SDH. This secures 49% of our 2014 forecast. We point out
that PS’s favorable earnings growth in 2015 is backed by 60% growth in condo revenue,
booking Bt12bn in 2014 versus Bt7.5bn in 2013, fully secured by current backlog. Our
current forecast is 7% ahead of consensus for 2013, but 5-6% below for 2014-2015.
- Reiterate BUY. The earnings cut and cut in PBV to 2x from 3x for a weaker outlook
leads us to lower our PT to Bt24/share from Bt36/share. At last close, the stock is
trading at an undemanding PBV of 1.6x of 2013, which falls to 1.4x of 2014 and 1.2x of
2015. After a share price correction of 47% during the past 10 months, we see limited
downside risk. We expect the backloaded presales and revenue to be share price
catalysts and thus maintain our BUY.